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Where U.S. Seniors Are Most Likely to Outlive Their Savings - and More
Imagine waking up tomorrow to find your healthcare costs soaring, your tax bill ballooning, and your nest egg stretched thinner than you ever thought possible—and you haven’t even begun to factor in the “what-ifs” of living past 90. This week’s Retirement Red Flags uncovers five pivotal developments—ranging from game-changing drug coverage to state-by-state savings shortfalls, Fed shake-ups, sneaky tax traps, and exploding medical bills—that could derail your golden years if you’re unprepared.
By RetirementRedFlags.com
August 1st, 2025
By paying attention to these five stories—and acting now—you can protect your nest egg, minimize tax headaches, and keep your retirement roadmap on course. Here’s to a secure, confident retirement!
1. Weight-Loss Drugs Coming to Medicare and Medicaid
The Trump administration has revived a Biden-era proposal to pilot coverage of GLP-1 weight-loss medications—such as Ozempic, Wegovy, Mounjaro, and Zepbound—under Medicaid (April 2026) and Medicare Part D (January 2027). Originally priced at $5,000–$7,000 per patient per year, these “miracle” drugs suppress appetite and slow digestion, promising to tackle chronic obesity among retirees and low-income Americans. However, the high sticker price could strain federal budgets, and coverage is optional for states and Part D plans.
Action Steps:
✔ Review your current Medicare Part D plan’s formulary to see if GLP-1 drugs might be added.
✔ If you’re on Medicaid, contact your state Medicaid office in late 2025 to understand enrollment options.
✔ Discuss weight-management alternatives with your healthcare provider, weighing effectiveness against out-of-pocket costs.
2. Dodge These Seven RMD Tax Mistakes
Required Minimum Distributions (RMDs) can land you in hot water with the IRS if mishandled. Kelley R. Taylor at Kiplinger highlights seven common pitfalls—miscalculating your RMD, missing deadlines, misunderstanding inherited IRA rules, misapplying the “still-working” exception, improperly aggregating accounts, overlooking market swings, and forgetting Qualified Charitable Distributions (QCDs).
Action Steps:
✔ Calendar It. Mark December 31 (or April 1 for your first RMD) annually—set a reminder at least two months in advance.
✔ Double-Check Calculations. Use IRS worksheets or consult a tax pro to verify life-expectancy tables and account balances.
✔ Leverage QCDs. If you’re 70½ or older, consider directing up to $105,000 from your IRA to charity to satisfy your RMD without adding to taxable income.
3. Where U.S. Seniors Are Most Likely to Outlive Their Savings
A Seniorly analysis finds retirees in 41 states (plus DC) face an average shortfall of $115,000 between projected expenses and available income—driven by income disparities, cost of living, and longevity. New York tops the list with a $448,000 gap; Hawaii ($417K), Washington, D.C. ($407K), Alaska ($342K), and California ($337K) follow. Conversely, Washington state retirees enjoy a $146,000 surplus, thanks to high average retirement incomes and moderate expenses. Utah, Montana, Colorado, and Iowa also rank among the most secure locales.
Action Steps:
✔ Reevaluate Your Location. If you’re considering a move, factor in cost-of-living and health-care expenses relative to your nest egg.
✔ Boost Savings. Maximize catch-up contributions in your 401(k) or IRA while you’re still working.
✔ Plan for Longevity. Use annuities or other guaranteed-income products to hedge against outliving your assets.
4. Why Fed Succession Could Shake Retiree Incomes
MarketWatch warns that replacing Fed Chair Jerome Powell in mid-2026 with someone less committed to taming inflation could heighten market volatility and erode retirees’ purchasing power. Powell has held rates at 4.25%–4.50% to curb inflation; a successor focused on rate cuts could reignite price pressures and push real yields lower—harming savers’ fixed-income returns.
Action Steps:
✔ Diversify Your Portfolio. Consider inflation-protected securities like TIPS and floating-rate bonds.
✔ Review Income Streams. Balance fixed-rate annuities with assets that benefit from rising rates.
✔ Stay Informed. Watch Fed announcements and adjust your withdrawal strategy to preserve purchasing power.
5. Medical Costs in Retirement Keep Climbing
Even with Medicare, a 65-year-old retiring today can expect to spend $172,500 on health and medical expenses through retirement—up 4% from 2024—covering premiums, copays, dental, vision, and OTC drugs. Yet one-in-five Americans never factor these costs into their retirement plans, and under 25% use Health Savings Accounts (HSAs), despite their tax advantages.
Action Steps:
✔ Open or Fund an HSA. If you’re eligible, contribute the maximum annually to cover future qualified medical expenses tax-free.
✔ Shop Plans Annually. During Medicare’s open enrollment, compare Part D and Medicare Advantage plans for the best premium vs. coverage trade-off.
✔ Budget Realistically. Allocate a dedicated “health fund” within your overall budget to absorb rising costs without derailing other goals.